How New Parents Can Prepare Financially for a Baby

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Becoming a parent is a profound journey, filled with hopes, dreams, and the promise of a brighter future. Among the many gifts you can bestow upon your child, establishing a secure financial foundation is a gesture of boundless commitment.

Embracing the transformative milestone of being a parent demands thoughtful preparation, for the early days of parenthood can be a whirlwind of expenses and adjustments. Yet, with a well-crafted plan, you can navigate this new chapter with grace and confidence.

Anticipating the Arrival: Pre-Baby Savings

In the quiet moments before your baby’s arrival, there lies an opportunity to fortify your financial stronghold. A fund, carefully nurtured over the span of at least three months up to a full year, can serve as a shield against unforeseen medical expenses.

Consider the costs of prenatal care, delivery, and postnatal support, and take into account the extent of your insurance coverage.

As data from the Peterson-KFF Health System Tracker reveal, childbirth-related expenses for mothers average around $19,000, a significant portion of which may be borne out-of-pocket. Armed with this knowledge, aim to secure a financial cushion ranging from $8,000 to a more substantial $30,000.

A Nine-Month Financial Symphony

The day you cradle your newborn in your arms is the inauguration of a new era, brimming with both joy and financial responsibilities. There will be so many factors to evaluate in depth, which can be overwhelming if you don’t have a set timeline for each of them.

To help you navigate through the tasks more practically, we offer the following schedule:

First Trimester: Orchestrating Financial Harmony

1. Assess Your Cashflow

Evaluating your monthly income against expenditures allows you to discern patterns and identify opportunities for optimization. Create a spreadsheet and jot down anything from your bank accounts, credit cards, and any outstanding loans. Think of any immediate adjustments you must make to reduce costs in the upcoming months.

2. Start Setting Money Aside

Even if a pre-baby savings hasn’t yet materialized, don’t be disheartened. Every dollar saved during this phase contributes to a more secure future. While you may not be able to accumulate enough money to cover all costs relating to childbirth, a modest allocation of $500 per month, for instance, is still valuable in dealing with unexpected expenses.

Tip: Take advantage of budget management and savings apps like Qapital, Fetch, Ibotta, and Chime to help you manage your savings more effectively.

3. Face Your High-Interest Debts

Now is the time to liberate yourself from the weight of high-interest debts, whole or just a portion. Whether employing the avalanche or snowball method, the objective remains consistent: to minimize interest accruals in the months ahead. If you are in a dilemma between debt repayment and savings, prioritize the latter, for you cannot escape stocking up supplies for the baby anyway.

4. Check Your Health Insurance

After having a good grasp of your financial strength, it is time to review if your health insurance may help you alleviate some of that hospital bill burden. In addition, explore short-term disability insurance and see if you can secure a portion of your income during maternity leave.

Second Trimester: Fine-Tuning the Symphony

1. Review Financial Performance

Now, as you round the corner into your second trimester, it’s time to review the fruits of your financial adjustments over the past three months. Keep fine-tuning your strategy and make any necessary course corrections that can help you secure a stable financial footing.

2. Check Your Parental Leave

You may have thought about your parental leave before, but the second trimester is when you give your plan a second check-up. While doing so, review your employer’s or state’s parental leave policies and examine the scope of support available to you. This will help you better anticipate how long you should be off work without landing yourself in a financial breakdown.

3. Don’t Worry About Getting a Bigger Home

Resist the urge to pursue larger accommodations solely for the baby’s imminent arrival, which might only give you more income stress than needed. Remember, their needs are simple, and their space requirements modest. Hold onto the comfort of your current abode, cherishing the moments it will witness.

4. Explore Baby Supplies

Baby supplies are not just one for two, and it is so easy to go overboard with alluring offers out there. The second trimester is a good time to start researching the market and form a list of all the essentials to get and ways to navigate through the costs, which we’ll explore later in detail.

Third Trimester: The Final Crescendo

1. Check Hospital Expenses and Discounts

As the final trimester unfurls, it’s time to confront the anticipated hospital expenses before it is your due date. As you dial the hospital offices, you can inquire about the costs associated with delivery, postpartum care, and your chosen level of medical support. Don’t hesitate to ask about additional services and potential discounts the clinic may be offering.

2. Study Child Care Options and Costs

Simultaneously, begin your exploration of childcare options and associated costs. A comprehensive understanding of these financial considerations empowers you to make informed decisions for your child’s future.

3. Getting Ready for the Arrival: 

Take a look at YouTube for lots of helpful videos. You can find free classes on yoga for moms-to-be and get advice from experts like teachers who know about childbirth, and people called doulas who help with birth. They talk about things like the best positions for mom and baby during birth, how to help the baby latch on properly, and how to change diapers well.

Don’t forget to share this helpful info with the soon-to-be dads, too! Knowing this together will help both of you feel more confident and relaxed about the birthing process and taking care of your baby.

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Practical Strategies When Buying Baby Supplies

Prepare for a budgeting reality check: the U.S. Department of Agriculture’s statistics suggest that a typical middle-income American family can dish out a whopping $12,000 or more in the baby’s first year.

If your eyebrows are on the rise, worry not. There’s a wallet-friendly way to navigate the parenthood path:

1. Slash unwanted spending. If you’re feeling the pinch, scrutinize your spending for lurking culprits. Ditch unused subscriptions, curb dining out, reel in takeout indulgences, and hold back on mall visits.
2. Prioritize essentials. Begin by identifying and prioritizing the absolute essentials. Focus on items like diapers, baby clothes, swaddle blankets, and feeding essentials. Invest in quality, comfort, and safety.
3. Tackle hyped-up buys. Stay savvy and steer clear of the hype that can lead to unnecessary splurges.
4. Ensure safety compliance. Prioritize safety in every purchase. Ensure that all products meet the latest safety standards and certifications, particularly for items like car seats, cribs, and high chairs.
5. Trim the tiny wardrobe. Don’t go overboard with buying new baby clothes. Maternity attire is fleeting, so use what you have or explore borrowing options—your little one won’t notice if the outfit has been worn before.
6. Consider secondhand and hand-me-downs. Not every baby item requires a fresh purchase, from tubs to strollers, furniture to toys. Craft a strategic shopping plan by researching what’s fit for a secondhand twist. Get the most bang for your buck at garage sales and consignment stores, and make your baby’s essentials list a budget-friendly breeze.
7. Sales, coupons, and baby club rewards. You’re in for savings galore when you hunt down discounts and baby specials. Look for baby websites and newsletters, or consider shopping at stores with baby clubs that shower you with more perks.
8. Join the buy/sell/trade network. Leverage the power of social media to connect with fellow parents for practical buying tips. Plus, these groups double as excellent marketplaces to resell baby gear as your little one grows. You'll find gently used or brand-new baby essentials on Facebook marketplaces, neighborhood listserves, Buy Nothing groups, and thrift stores.
9. Invest in practical storage. Stay organized by investing in shelving units, baskets, and storage bins. A well-organized nursery streamlines daily routines and creates a serene environment.
10. Invest in feeding essentials. Depending on your feeding plan, invest in a quality breast pump or gather bottle-feeding essentials. Research and select a comfortable nursing chair or glider for those cherished bonding moments.
11. Trial and error is okay. Understand that what works for one baby may not work for another. Be open to adjusting your choices based on your baby’s preferences and needs. Trial and error are integral parts of the parenting journey.

Remember, thoughtful curation of baby supplies ensures that you invest in items that truly enhance your parenting experience.

Welcoming Your Little One: An Emotional Investment

The moment your baby arrives, a world of boundless possibilities unfurls before you. Amid the whirlwind of joy, consider these essential financial steps:

1. Child Tax Credits: Nurturing Future Prosperity

Explore your eligibility for invaluable tax deductions, such as the Child Tax Credit and the Additional Child Tax Credit. These policies have the potential to alleviate financial burdens, offering up to $2,000 in tax relief per child, with a portion of this amount being refundable.

2. Emergency Fund: A Sanctuary of Security

An emergency fund stands as a bastion against unforeseen circumstances, shielding you from the need to borrow at exorbitant interest rates. For standard, you can commence with a modest sum of $1,000 and gradually expand it to embrace a greater sense of financial security.

3. Health Savings Accounts: A Strategic Health Investment

You can enjoy the benefits of using pretax dollars when you visit doctors with your kids. Eligible through your health insurance provider, health savings accounts provide an opportunity to set aside pretax dollars for medical expenditures such as prenatal vitamins and car seats.

The real kicker? These funds roll over year after year if not spent, and the interest or investment earnings on this money are tax-free as well.

4. College Savings: Paving the Path to Knowledge

As of 2023, EducationData.org expected that the annual state college fees in the United States would reach over $35,000 per pupil each year. If you really want to afford your child’s higher education fully, you are signing up for at least $7,000 in savings each year for 20 years to come.

In the pursuit of providing your child with a future steeped in educational opportunities, consider the state-sponsored 529 plan. This initiative allows you to amass resources for higher education, with accrued interest being tax-exempt for qualified expenses.

Read more on How to Pay for College.

5. Adopt A Habit of Vigilant Financial Oversight

When you are a parent, it can be difficult to judge what is beneficial and what is indulgent for your child when you shop. Yet, you are not always financially able to afford everything.

That is why it is time to make some changes in your financial routine and be more acknowledged. This helps instill discipline and ensure that your expenditures align with your long-term goals.

6. Give Your Child Finance Education

A way to prepare your children financially is to equip them with the basics of money management at a young age. This will prepare them against falling into bad spending patterns. After all, good habits are easier to form than to fix.

Embracing the Journey of Setting Your Baby Up Financially

In the midst of this transformative journey, remember that every choice you make is an investment in your child’s future. From securing their financial well-being to nurturing their emotional growth, each decision is a testament to your unwavering love.

As the days unfold, cherish the tender moments and relish the knowledge that you are shaping a future of promise and possibility. With each step, you are not only preparing for a baby’s arrival but laying the foundation for a lifetime of shared adventures and boundless horizons.

Clare Nguyen contributed to this article.

The Epoch Times copyright © 2023. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.